LML LIMITED ANNUAL REPORT 2015-16 BOARDS REPORT To, The Members Your Directors have pleasure in presenting the Fortieth Annual Report together with audited financial statement for the financial year ended 31 st March, 2016. This report pertains to financial year that commenced from April 01, 2015 and the contents herein are governed by the relevant provisions/ sections/ rules of Companies Act, 2013 and Regulations of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. This report also includes Management Discussion & Analysis (MD&A). during the year. The Company is registered as a Sick Industrial Company under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The Company has temporarily suspended production activity (of 2-wheeler) w.e.f. 6 th May, 2016 to enable it to carry out maintenance work which is overdue for long, check adequacy / suitability of the present facility for taking up the manufacturing light three wheeler and to realign the plant & machinery and other work / activity for the same, if so, required and this is likely to take about 3 months time. The Company is working on development and industrialization of various new products and technology, including new generation 4-stroke two wheelers and light 3-wheeler vehicle. Barring unforeseen circumstances, it is expected to launch light 3 wheeler vehicle during FY 2016-17. 1. Financial Results (Rs. In crores) Export and Domestic sales performance of your Company was as follows: Particulars Gross Sales and Other Income 31.03.2016 31.03.2015 160.32 212.58 Particulars Scooters - Export 31.03.2016 (Nos.) 31.03.2015 (Nos.) 8688 26184 Profit/(loss) before Interest, Depreciation, Exceptional Items & Taxation (21.68) (25.46) - Domestic 4225 11902 Total 12913 38086 Interest 47.33 43.02 Cash Loss 69.01 68.48 Depreciation, Amortizations & Impairment of Fixed Assets 9.35 12.61 Loss before Taxation 78.36 81.09 4. Exports Exports were 8688 vehicles during the year as against 26184 units during the previous year. Company s exports are made to many countries including USA, countries in the European Union, Africa, Latin America, Asia etc. 5. Directors Responsibility Statement Pursuant to Section 134(5) of the Companies Act, 2013, the Directors confirm: Provision for taxation: - Current Tax - - Exceptional Items - - Net Profit/ (Loss) (78.36) (81.09) Production (Nos.) 12632 35205 Sales (Nos.) (excluding CKD sales) 12913 38086 In view of loss, no amount is proposed to be carried to or transferred to any type of reserves. 2. Dividend Directors regret their inability, in view of the losses, to recommend any dividend for the year. 3. Operations The Company s operations during last few years have been adversely affected due to a dramatic shift in consumer preference from 2-stroke geared scooters to 4-stroke motorcycles and 4-stroke gearless scooters. The situation was further aggravated during the year due to general economic slowdown in the Indian economy. The turmoil in the African market and economic slow down in developed economies has adversely affected the Company s export 18 a) that in the preparation of the annual accounts, the applicable accounting standards have been followed and that no material departures have been made from the same; b) that they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the losses of the Company for that period; c) that they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) that they have prepared the annual accounts on a going concern basis; e) that they have laid down the internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; f) that they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
6. Corporate Governance As required under Regulations 34(3) of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, a detailed Report on Corporate Governance is enclosed. A certificate from the Auditors of your Company regarding compliance of the conditions of Corporate Governance as stipulated in Schedule V (E) of the SEBI (LODR) Regulations, 2015 is annexed. The Chairman & Managing Director and Chief Financial Officer of the Company have given necessary Certificate to the Board in terms of Regulations 17 (8) of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 for the financial year ended 31st March. 2016. 7. Audit Committee The Board of Directors has an Audit Committee with a composition as specified in the Section 177 of the Companies Act, 2013 and Regulations 18 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. The details of Audit Committee are specified in Corporate Governance Report which forms part of this Annual Report. The Board has accepted recommendations of the Committee on all matters. 8. Management Discussion and Analysis (a) Macro-economic Developments and overall review The world economies are still not out of the adverse effect of the financial crises which started in 2008. Due to the persistent slow growth in advanced economies and continuing headwinds for emerging market, significant downside risks remain and events that make those risks more salient may well trigger (b) renewed financial turbulence, impairing confidence and demand in a self confirming negative feedback loop. In addition there are signs of several stresses of non-economic origin related to geopolitical conflicts, political discord, terrorism, refugee flows or global epidemics in some countries and regions which threaten economic activity. The Indian economy continues to suffer due to continuous monsoon deficit for last two years coupled with un-seasonal rain which has adversely affected rural demand. As per the latest forecast, the monsoon in the current year is expected to be normal which may help in recovery and growth of economy. However, a number of factors could impinge upon the growth outlook for 2016-17, like slow investment recovery, low capacity utilisation in industrial sector, slow revival of private investment and tepid global output and trade growth, dragging down net exports. Two wheeler Industry in India Two-wheeler industry struggled during the year. The rural economy is a big market for two-wheelers. Farm incomes reduced and rural demand took a hit as poor monsoons wreaked havoc on crop production which impacted demand for two-wheelers. Exports growth was also subdued because of currency problems in markets like Africa and Asia. However, with expected revival of Indian economy, the demand for two-wheeler is likely to pick up. Domestic Sales Industry Structure 2013-14 (April 13-March 14) 2014-15 (April 2014 March 2015) 2015-16 (April 2015 March 2016) Growth % Over 2013-14 Share % of 14-15 Growth % Over 2014-15 Share % of 15-16 Scooters 3.602 4.503 25 28 5.032 12 31 Motorcycles 10.479 10.708 2 67 10.700 0 65 Mopeds 0.722 0.687-5 4 0.724 9 4 Total 14.803 15.898 7 100 16.456 4 100 Export Sales 2013-14 (April 13-March 14) 2014-15 (April 2014 March 2015) 2015-16 (April 2015 March 2016) Industry Structure Growth % Over 2013-14 Share % of 14-15 Growth % Over 2014-15 Share % of 15-16 Scooters 0.093 0.196 111 8 0.257 31 10 Motorcycles 1.982 2.259 14 92 2.209-2 89 Mopeds 0.007 0.008 14 0 0.015 88 1 Total 2.082 2.463 18 100 2.481 1 100 19
LML LIMITED ANNUAL REPORT 2015-16 (c) Company Performance Company s performance during the year was adversely affected inter alia due to global recessionary conditions and specially political and economic condition prevailing in African and developed economies as well as weak domestic demand. (d) Opportunities and Threats LML stands for the highest standards of technical expertise, product innovation and has one of the finest R & D capabilities, particularly relating to designing, rapid proto-typing, CAD - CAM, tooling and industrialization. It is harnessing these strengths and its vast experience coupled with a aggressive business strategy for its revival and turnaround. (e) Outlook As stated elsewhere in this report the Company has been working for its revival including development of new products including those having state of the art technology. (f) Performance Review Due to various reasons and problems the Company could not leverage its rich technological strengths during the year under review and the sales volume was 12913 units in financial year 2015-16 as compared to 38086 units in financial year 2014-15.. (g) Financial Review Revenues - Gross Sales and Other Income during the year was Rs. 160.32 crores as compared to Rs. 212.58 crores in the previous financial year 2014-15. Operating Profit/Loss The Company reported a net Operating Loss during the year of Rs 21.68 crores as compared to net operating loss of Rs. 25.46 crore in the previous financial year 2014-15. Interest Interest was Rs 47.33 crores during the year as compared to Rs. 43.02 crores in the previous financial year 2014-15. Depreciation, Amortization & Impairment of Fixed Assets Depreciation, Amortization & Impairment of Fixed Assets during the year was at Rs 9.35 crores as compared to Rs. 12.61 crores in the previous financial year 2014-15. Loss before tax - The Company reported a loss before tax and exceptional items during the year of Rs 78.36 crores as compared to Rs. 81.09 crores in the previous financial year 2014-15. given in annual general meeting notice. During the year under review, no Director has been appointed or resigned from the Board of Directors All the Independent Directors have submitted their declaration of independence, as required under section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as provided in section 149(6) of the Companies Act, 2013 and under Regulations 25 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. 10. Whole Time Key Managerial Personnel (KMP) In pursuance of the compliance of Section 203 of the Companies Act, 2013 the following persons have been designated as Whole Time Key Managerial Personnel of the Company:- 1. Mr. Deepak Kumar Singhania Chairman & Managing Director 2. Mr. K. C. Agarwal Sr. President (Commercial) & Company Secretary 3. Mr. Mahesh Kumar Kanodia Chief Financial Officer During the year under review, no KMP has resigned from the Company. 11. Extract of Annual Return Pursuant to section 92(3) of the Companies Act, 2013 ( the Act ) and rule 12(1) of the Companies (Management and Administration) Rules, 2014, the required extract of Annual Return in prescribed form MGT-9 is attached as Annexure A with this Board Report. 12. Nomination & Remuneration Policy The Company has, on the recommendations and approval of Nomination & Remuneration Committee, formulated a Nomination & Remuneration Policy which governs Directors appointment including criteria for determining their qualifications, positive attributes, their independence and remuneration for the Directors, KMPs and other employees which was passed by the Board in its meeting held on 8 th November, 2014. The Nomination and Remuneration Policy is attached as Annexure B with this Board Report. 13. Particulars of Loan, Guarantees or Investments No loan, guarantee or investments were made during the year by the Company under Section 186 of the Companies Act, 2013. Share Capital Company s Paid-up Equity Share Capital is Rs. 81.98 crores as on 31.03.2016. (h) Human Resources Your Company treats human resource a very important asset. Your Company continuously invest in attraction, retention and development of talent on an ongoing basis. 9. Directorate Mr Sanjeev Shriya (DIN: 00014402) and Mr Anurag Kumar Singhania (DIN: 00080925) Directors of the Company are liable to retire by rotation and being eligible, offer themselves for re-appointment as Directors of the Company. The Nomination & Remuneration Committee and Board have recommended to re-appoint Mr. Deepak Kumar Singhania (DIN-00012037) as Chairman & Managing Director and Mr. Ram Kumar Srivastava (DIN: 00763948) as Whole-time Director of the Company as per details 20 14. Related Party Disclosure Particulars of contracts or arrangements with Related Party referred in Section 188 (1) of the Companies Act, 2013 in prescribed form AOC-2 is attached as Annexure C with this Board Report. As required under Regulations 23 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Company has formulated a policy for dealing with Related Party Transactions. The Policy is available on the website of the Company (www.lmlworld.com) with a Weblink :http://www.lmlworld.com/pdf/rpt-policy.pdf 15. Material changes and commitments No material Changes or commitments affecting the financial position of the Company occurred between the end of the financial year to which the financial statements relates and the date of the report.
16. Risk Management Policy The Board has established a Risk Management Policy which formalizes the Company s approach to overview and manage material business risks. Risks and effectiveness of their management are internally reviewed and reported regularly to the Board. There are adequate systems and procedures in place to identify, assess, monitor and manage risks. 17. Annual Evaluation The Board has carried out the Annual Performance Evaluation of its own, its Committees and individual Directors based on the Performance Evaluation Report submitted by the Nomination & Remuneration Committee, as per Performance Evaluation Policy of the Company, and Performance Evaluation of non-independent Directors, Chairman and the Board as a whole done by the Independent Directors in their separate meeting during the year. 18. Number of Board Meetings The details of the number of meetings of the Board held during the Financial Year 2015-16 along with attendance details of each director forms part of the Corporate Governance Report which forms part of this Annual Report. 19. Corporate Social Responsibility The provision related to Corporate social responsibility under the Companies Act, 2013 is not applicable to the Company in view of losses and negative net- worth and turnover being below prescribed amount. 20. Details of Committees The details of Committees of the Board forms part of Corporate Governance Report which forms part of this Annual Report. 21. Whistle Blower Policy The Company has a Whistle Blower Policy, including vigil mechanism to report genuine concerns of grievances, providing direct access to the Chairperson of the Audit Committee in appropriate and exceptional cases. The Whistle Blower Policy has been posted on the website of the Company (www.lmlworld.com) with a weblink: http://www. lmlworld.com/pdf/lml-whistle-blower-policy.pdf During the year, no matter has been reported to the Audit Committee 22. Internal Financial Control The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no material weakness was observed by the internal auditor of the Company. 23. Subsidiary/ Associate Companies There is no Subsidiary of the Company. However, policy of determining material subsidiaries formulated by the Company is placed on the web-site of the Company (www. lmlworld.com). The Company is a promoter of one Associate Company namely M/s VCCL Limited. The consolidated financial statement of VCCL Limited is enclosed as part of this Report. There are no companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year. Statement pursuant to Section 129(3) of the Companies Act, 2013 related to Associate Company in prescribed form AOC-1 is attached as Annexure D with this Board Report. 24. Deposits Your Company has not accepted any deposits from public in terms of provisions of Companies Act, 2013. 25. Personnel The Company had 2558 employees as on 31.03.2016. As per Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, none of the employee was in receipt of remuneration of Rs. 60.00 Lacs or more per annum throughout the year or Rs. 5.00 Lacs per month for the part of the year. Further, none of the employees is in receipt of remuneration which is in excess of the remuneration drawn by Managing Director or Whole-time Director or any manager of the Company and who also holds by himself or along with his/ her spouse and dependent children, not less than 2% of equity shares of the Company. a. Pursuant to the Rule 5(1) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the information required to be disclosed by every Listed Companies in its Board Report are as follows:- Name of Director/ KMP and Designation Lalit Kumar Singhania Whole-time Director * Deepak Kumar Singhania Chairman & Managing Director * Anurag Kumar Singhania Whole-time Director * Ram Kumar Srivastava Whole-time Director Khushahal Chand Agarwal Sr. President (Comml.) & Company Secretary ** Mahesh Kumar Kanodia Chief Financial Officer ** Remuneration of Directors/ KMPs for FY 2015-16 % age increase in remuneration in FY 2015-16 Ratio of Remuneration of each Director / to the median remuneration of employee 17,74,701 86.65 68.41 17,96,294 1.13 69.24 17,89,229 81.80 68.97 18,00,000 NIL 69.39 41,74,689 (0.26) N.A. 21,94,864 0.09 N.A. Comparison of the remuneration of the KMP against the performance of the company Loss before and after tax of the Company decreased by 3.37% in FY 2015-16. 21
LML LIMITED ANNUAL REPORT 2015-16 * The remuneration to all Directors are within permissible limits as approved by MCA. There is no increase in rem- -uneration during the year Variations are on account of increase/decrease in availment of perquisites. ** The remuneration to Key Managerial Personnel are as per last year and as per sanctions. There is no increase in remuneration during the year. Variations are on account of Increase / decrease in availment of perquisites. S. No. b. The Median remuneration of employees of the Company during the financial year was Rs. 25942. c. The percentage decrease in the median remuneration of employees in the financial year was 47.85. d. Variations in the market capitalization of the company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial year and previous financial year; Company s market capitalization increased by 9.75% to Rs. 59,02,87,104 as of March 31, 2016 from Rs. 53,78,17,139 as of March 31, 2015. The price earning ratio was (0.75) as of March 31, 2016 in comparison to (0.66) as compared to March 31, 2015. The closing price of the Company equity shares on the NSE and BSE as of March 31, 2016 was Rs. 7.20 and Rs. 7.20 respectively. e. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration: Since Company is a Sick Industrial company and in view of losses, no increase was made in the managerial remuneration. f. The key parameters for any variable component of remuneration availed by the directors: No variable component of remuneration was availed by the Directors of the Company. g. The ratio of the remuneration of the highest paid Director to that of the employees who are not Directors but receive remuneration in excess of the highest paid Director during the year: The highest paid Director in the Company is Mr. R. K. Srivastava with annual remuneration of Rs. 18 Lakhs as per Central Govt. approval. The ratio of remuneration of employees receiving in excess to that is as follows:- Name of Employees Ratio to highest paid Director 1 MR RAVINDRA KUMAR 1.11 2 MR S K MAHAJAN 1.22 3 MR AJAY KUMAR GOYAL 1.20 4 MR SUMIT CHATTERJEE 1.21 5 MR MAHESH KUMAR KANODIA 1.22 6 MR G N SRIVASTAVA 1.22 7 MR VIPIN CHAUDHARY 1.50 8 MR GIRISH R MARATHE 1.85 9 MR P P S CHOUDHARY 1.92 10 MR ASHOKE KUMAR SINHA 2.27 11 MR KHUSHAHAL CHAND AGARWAL 2.32 12 Mr KAMAL GOYAL 1.21 h. It is hereby affirmed that the remuneration paid is as per the Remuneration Policy of the Company. 26. Auditors and their reports a) Statutory Auditors M/s. Khandelwal Jain & Co. (FRN 105049W), Chartered Accountants, were appointed as Statutory Auditor of the Company for a period of three years and M/s. Parikh & Jain (FRN 001105C), Chartered Accountants, were appointed as Statutory Auditor of the Company for a period of two years in previous Annual General Meeting held on 23.09.2014. The Board proposes to members of the Company to ratify the appointment of M/s Khandelwal Jain & Co. (FRN 105049W), Chartered Accountants for the financial year 2016-17, pursuant to the provisions of Section 139 of the Companies Act, 2013, at the ensuing Annual General Meeting of the Company. M/s Parikh & Jain (FRN 001105C) are not eligible for re-appointment. In respect of observations made by the Statutory Auditors in their Report, your Directors wish to state that the respective notes to the accounts are selfexplanatory and do not call for any further comments. b) Secretarial Auditors M/s. Adesh Tandon & Ass., Practicing Company Secretary (FCS. 2253, CP No. 1121) of Kanpur, reappointed as Secretarial Auditors of the Company for the FY 2016-17 and submitted their Secretarial Audit Report for the Financial Year 2015-16, pursuant to the Section 204 of the Companies Act, 2013 which is being attached herewith as Annexure E No adverse observations are made by the Secretarial Auditors in their Report. c) Internal Auditors Pursuant to Section 138 of the Companies Act, 2013, Board has appointed M/s Onkar Tandon & Co., Chartered Accountants (FRN 000953C) of Kanpur as Internal Auditor of the Company for the financial year 2016-17 as recommended by the Audit Committee of the Company. 22
d) Cost Auditors As per the Companies (Cost Accounting Records) Rules, 2013 issued by the Ministry of Corporate Affairs, the Company is not required to appoint the Cost Auditor. 27. Conservation of Energy Company continued to envisage and implement energy conservation measures in various manufacturing operations leading to savings of quantitative consumption of power, fuel & oil etc. Energy conservation during the year under various heads resulted into an estimated saving of Rs. 3.30 lacs (in previous financial year 2014-15: Rs. 2.70 lacs). 28. Pollution Control Relevant and necessary effluent treatment plants and other measures for control of water, air and environmental pollution are in place and steps have been taken to further strengthen and consolidate pollution control measures. No Objection Certificates from the U.P. Pollution Control Board are obtained from time to time. 29. Technology Absorption Requisite information in prescribed form is given in Annexure F to this report. 30. Foreign Exchange Earnings and Outgo Your Company earned during the year Foreign Exchange of Rs. 127.09 crores (previous financial year Rs. 144.57 crores) while Foreign Exchange outgo during the year amounted to Rs. 4.12 crores (previous financial year - Rs. 13.09 crores). 31. Stock Exchange Listing The Equity Shares of the Company are listed on the following Stock Exchanges (with respective scrip codes/ symbol):- (i) BSE Limited (BSE), Mumbai (500255); (ii) National Stock Exchange of India Limited (NSE), Mumbai (LML). The Equity and Preference Shares of the Company were also listed on the U.P. Stock Exchange Limited, Kanpur. However, as per SEBI circular dated May 30 th 2012 read with circular dated May 22 nd 2014 related to Companies exclusively listed on De-recognized/ Non-operational Stock Exchanges, U.P. Stock Exchange Limited, Kanpur got de-recognized on account of non fulfillment of the prescribed conditions. The Company confirms that it has paid the annual listing fee to BSE and NSE. net worth and the Company was declared a Sick Industrial company by BIFR on 8 th May, 2007. The Company is working for its revival under the aegis of BIFR. In view of this, no impact is foreseen on the going concern status of the Company and the Company s operations in future. The matter is pending before the Hon ble BIFR. The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 is not applicable to the Company, as there is no woman employee in the Company. 34. Cautionary Statement The statement in the Director s report and MD&A, detailing the Company s objectives and expectations, may contain forward looking statements within the meaning of applicable securities laws and regulations. The actual results inter-alia may differ materially from those expressed or implied, depending upon changes in global and Indian demand-supply conditions as well as changes in government regulations, tax regimes, economic and market developments, movements. 35. Other disclosures (i) Statutory Auditors of the Company has not reported any incident relating to fraud during the financial year to the Audit Committee or Board of Directors under section 143(12) of the Companies Act 2013 (ii) No significant and material orders has been passed by the Regulators or courts or tribunals impacting the going concern status and Company s operations in future. 36. Acknowledgement Your Directors take this opportunity to appreciate deeply the valuable co-operation extended by the Central and State Government authorities and are extremely grateful to the Financial Institutions and Banks for their continued assistance, guidance and support. Your Directors are also grateful to all stake-holders, including Customers, Shareholders, Employees, Vendors, Distributors, Dealers / Sub-dealers, and the general public for their support and confidence reposed in the Management. Place : Gurgaon Dated: 26.05.2016 For and on behalf of Board of Directors for LML Limited Deepak Kumar Singhania Chairman & Managing Director DIN No.: 00012037 32. Depository System SEBI vide its Circular No. SMDRP/Policy/CIR-01/2000 dated 6 th January, 2000 notified that trading in Equity Shares of the Company is permitted only in dematerialized form w.e.f. 17 th January, 2000. Requests received for dematerialization of shares are processed and confirmation is given to the respective depositories i.e. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) within the stipulated time. As on 31 st March, 2016, 95.91% equity shares of the Company have been dematerialized. 33. General The Company became a Sick Industrial Company within the meaning of Section 3(1)(o) of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) due to erosion of its 23